Cash Flow Worksheet Instructions and Explanation.
Note: Cells shaded yellow and with an orange font are for your to input. Those not
shaded yellow are calculated from your input but do not need input from you. I have
highlighted in yellow on this sheet those cells you need to fill-out.
Purchase Price (B2): Enter purchase price. If you are paying a wholesale fee add this to
the total purchase price.
ARV (B4): Enter the After Repair Value. The true market value of the home after you
have done any repairs necessary.
Costs (B5 and C5): This is your equity or discount. It is a factor to help you determine
you asking price. If you want to use a number lower or higher than 30% feel free to
change cell C5.
REHAB (B6): Enter the amount you estimate to renovate the home. Include such related
costs as re-zoning.
MAO (B7): Maximum Allowable Offer. Buying at this number gives you 30% equity (or
whatever number is in C5).
Starting MAO (B8): Merely a guideline. It is 15% lower than MAO.
REFI (B12 and C12): Enter the LTV (Loan-to-Value) you want or able to qualify for in
C5. Cell B5 will give you your loan amount.
Rent (B13): Enter the monthly rent you expect to receive. Do not subtract utilities you
expect to pay or management fees; only enter the gross rent.
Total Expenses (B14): The sum of all your expenses as listed in the “F” column, it does
include your Debt Service.
Cash Flow (B16): This is your Cash Flow from the property Rent subtracted from all
your Expenses.
RER PCF (B17): The Real Estate Riches formula does not include a Vacancy factor or a
Maintenance factor. I have added back Vacancy and Maintenance expenses back into this
formula. My Cash Flow includes a Vacancy and Maintenance factor. If you don’t want to
use those you can put in 0% (H15) for Vacancy and $0 (F16) for Maintenance and Cash
Flow and RER PCF will be the same.
100% C. Flow (B18 and C19): This is to compare apples to apples. Some deals will
have a cash-out amount (you receive more from you refinance then you have into the
property) and some as in a direct purchase may require you to have a down payment or
the deal may be such that you have a negative cash out (ie. Leaving money in the
property.)
So to clarify lets take two examples. First lets say you cash out $5,000 on a property. The
question is what is that $5,000 worth to you. If you use it to pay off your 8% car loan
then you might want to put 8% into the C22 block. If you pay off 24% credit card loans
then you could put in 24%. If you put it in a 3% money market account (with Wachovia,
hopefully) then you could put 3%.
So in effect this cell helps determine how much this money is worth to you and adds or
subtracts it from the overall cash flow. If you use the $5,000 to payoff high interest debt
it doesn’t change the cash flow on the particular property (in fact taking the extra cash out
decreases your cash flow on the property) but it does improve your personal (global) cash
flow as you have replaced high interest short-term debt with low-interest, tax deductible
long-term debt.
The second scenario is you leave money in the property. If you use a high number in C19
(meaning you need to borrow money from credit cards to fund the property) your 100%
cash flow will be reduced more than if you used money from a 3% money market ( and
put 3% in C22.
NOI (Yr) (B20): Net Operating Income. Is the Cash Flow (B16) of a property without
financing (Debt Service).
100% Cost (B22 and C22): This is the cost of your funds it will be positive or negative
depending if you cash-out or leave money in the property. See an in depth explanation
above under 100% Cash Flow.
Cap Rate (C25): Capitlization Rate. Is the NOI divided by the total cash you have
invested (F2). It is basically a rate of return factor. CAP rate is used more often in
commercial investments but it is applicable to residential income producing real estate.
Cash In (F2): Represents the total cash needed to buy the property. Including Purchase
Price (which includes wholesale fees) + REHAB + your Holding Cost (F3) Factor.
Hold Cost (F3): I use this factor to get a legitimate cost of purchase (Cash In). It includes
costs to purchase, refinance and other holding costs. Note: You can factor in vacancy into
the holding cost as the property most likely won’t be occupied in the first few months or
you can assume this is already factored in with the Vacancy factor built in to the Cash
Flow number.
Cash Out C13 (F5): Simply the amount you are financing subtracting your Cash In. A
positive number means you are taking cash out. A negative number means you are
leaving cash in the deal.
Settle Help: (F7 and G7): Settlement help is not applicable on a cash offer (so the G7
number would be 0%) but if you are buying with financing you might require the seller to
pay some of your closing costs. This will lower your Cash In cost.
Debt Svc (F11, H11 and H12): This takes the loan amount and calculates a payment.
Simply fill in your Interest Rate (H11) and the amortization period (H12) in months.
Taxes (F12): Property taxes per month.
Insurance (F13): Homeowners Insurance per month. Also include flood insurance if
applicable or include it in Other (F23)
Management (F14 and H14): Fill in your management expense in percentage terms in
H14 and this will factor in that percentage based on your gross rent (B13).
Vacancy (F15 and H15): I use 8% or one month per year as a vacancy factor you can use
whatever you like. Higher for less desirable areas, lower for more desirable areas.
Maintenance: (F16): Generally I use $25 to $50 per month depending on condition.
Usually $25 per unit on multi-families. Use your own experience to choose your own
number.
Utilities (F17 – F23): Your property may require you to pay water, sewer, electric, heat,
hot water, trash and put in any Other expenses such as landscaping, snow removal etc.
Total (- D.Svc) (F24): This is your total expenses for the property unrelated to debt
service.
SECOND PAGE
I use this page to analyze flips. I have not done any flips I have strictly done buy and hold
so please feel free to let me know if you find any errors or items that should be included
or adjusted with this spread sheet. Thanks.
Re-Sale Price: The price you expect to sell the home at.
Purchase Price: Contracted price including any wholesale fees.
REHAB: Cost of renovations.
Taxes: Property Taxes per year.
Insurance: Insurance per Year.
Closing Fees: Closing Fees. Feel free to put your own numbers in based on your area and
the providers you use.
Utilities: Cost per year of utilities on property while REHABing and Selling.
Cost of Funds: This is basically opportunity cost of tying up your money while flipping
or your interest cost for borrowing that money.
Selling Cost: Again put in your number. Mostly this is made up of Realtor Commission
and Transfer Tax.
Total Costs: A sum of all your costs.
Profit: Sale Price – Contract Price – Rehab – Holding Costs.
% Return: Profit divided by amount invested (Total Cost).
6 Month Savings: If you sell and settle on your home in 6 months instead of 12 (which is
my default assumption in this slow market) you will realize savings on taxes, insurance,
utilities and holding costs.
% Return: Increased rate of return based on lower costs because of a quick sale.